Bank Resolution (Recapitalisation) Act implemented

The Bank Resolution (Recapitalisation) Act 2025 (Commencement) Regulations 2025 have been made, which brings into force certain provisions of the Bank Resolution (Recapitalisation) Act 2025 from 16 July, in parallel with the Prudential Regulation Authority (PRA) confirming concomitant changes to its rules also taking effect on 16 July, in its policy statement. The Act makes provision for recapitalisation costs in relation to the special resolution regime under the Banking Act 2009, and in particular, on how the regime is applied to smaller banks which do not hold a minimum requirement for own funds and eligible liabilities (MREL). It expands the statutory functions of the Financial Services Compensation Scheme (FSCS) so that it is required to provide funds to the Bank of England on request, which can be used to meet certain costs from the use of the resolution regime to manage the failure of a bank, building society or other PRA-authorised investment firm.

It also allows the FSCS to use its levy-raising powers to recover funds provided, through imposing levies on the banking sector. The PRA had previously consulted on the necessary rule changes to implement the new requirements, including updating the depositor protection part of the PRA rulebook to ensure the rules reflected the FSCS's new powers ad obligations. The changes to the PRA rules include the creation of a new class of levy payer, amending the process for the management of recoveries, general amendments to ensure the new provisions work alongside existing constructs, and removal of references which are no longer relevant or needed. The PRA's policy statement confirmed that only one minor change had been made to the proposals in the earlier consultation, which related to the naming of the new class of recapitalisation levies.

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